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But veteran recruiter Mark Elzweig says that late October article is already extremely out of date, assuming it was ever more than just “wishful thinking” on the part of wirehouse execs eager to protect their bottom lines.

Bloomberg reported that Morgan Stanley paid out 57% of its wealth management revenue as compensation in the third quarter, down from 63% the previous year, quoting its CEO, James Gorman, as describing broker bonuses as “a tax on the industry.”

But the principal of the Mark Elzweig Co., a recruiter for 28 years, says that Wall Street pay packages are as generous as they’ve ever been. In fact, his periodic “Elzweig Deal Forecast” shows 5 shiny suns, his highest rating, and shows that total pay packages for wirehouses rise into the 300% range currently.

“The amount [the wirehouses] are in fact paying has gone way higher than I ever dreamed it would go,” he tells ThinkAdvisor in an interview. “Barring a radical collapse of the stock market, I don’t see that changing.”

So how is it that wirehouses declare a truce yet, in Elzweig’s estimation (or Hamlet’s) “it is a custom more honored in the breach than the observance”?

Elzweig compares the situation to the OPEC cartel, which has frequently hammered out agreements among oil producers as to how much they will charge for a barrel of oil, to boost their profitability, but where each member has a perverse incentive to capitalize on its own excess supply through covert side deals.

Elzweig says a similar gentlemen’s agreement was attempted in the 1990s, between Sandy Weill, then CEO of Smith Barney, and his Merrill Lynch counterpart, Dan Tully.

“They decided that upfront money was some kind of evil that had to be ended," he recalls. "The wirehouses somehow made a pact, a tacit agreement that everybody was going to stop paying.”

Before long, however, somebody discovered: “‘They took two of our guys in the Midwest, now we can take two of their guys in the Midwest; within six months it’s all unraveled,” Elzweig says.

But the Manhattan-based recruiter insists the situation today is far less favorable to a truce in the recruitment wars.

“Right now wirehouses [face] so many people interested in going independent, regional firms have stepped up and are paying more than before. They’re all dealing with an aging and shrinking sales force. Cerulli says wirehouses are losing 2.5% of their advisors per year and the industry as a whole is losing 1.2% per year.

“We know the average age of an advisor is around 52,” he continues. “Basically, in the face of especially vigorous competition from wirehouses, regionals and independents, you have to have a very aggressive recruiting package. You never know when one of your teams is going to hit the bid…There are many cases of people who have worked for a major wirehouse for 20 years or more who are leaving; that’s not uncommon.”

While wirehouse firms would optimally prefer to avoid recruitment wars, another reason why peace is not likely to break out any time soon, says Elzweig, is that these deals generate lots of revenue for the firms, and are not seen as overhead. As such, the deals have worked out well for the firms who pay up.

“The average wirehouse broker has over $100 million in assets under management, compared to $20-odd million on the independent side,” he says.

But to justify the high costs of snagging the industry’s top producers, the wirehouses continue to extend the length of their contracts in order to retain their return on investment. Elzweig says wirehouse contracts currently average 9 to 10 years.

But it is exactly this dynamic that further fuels the arms race in recruitment, since a recruiting firm has to continually increase the amount of upfront money it offers in order to compensate producers who forgo some of the benefits of their current contracts.

Elzweig recalls his start in recruiting, in the mid-’80s, when firms were paying 30% bonuses to $500,000 producers, then considered very big, for three-year contracts. To protect their revenue, firms started giving these top producers retention awards, but that only impelled recruiting firms to increase their offers by a margin above the retention bonuses, so the advisor would realize a profit.

As for now, despite the propaganda — or wishful thinking — in the wirehouse recruitment wars, all parties have stepped up their offers, Elzweig says.

“If you have a solid practice at a wirehouse, you can count on getting 100% to 150% up front with a back-end bonus schedule to get you anywhere from 200% to over 300% — if you increase your assets by 50%.” That works out to total packages that could go into the low 300% range, he clarifies.

“We’re in a world where there is a finite and in fact declining supply of good producers and, like it or not, firms are going to have to compete vigorously to attract and retain talent,” Elzweig concludes.

“Optimally, firms would like to not pay signing bonuses, but it happens to be a business reality from which they cannot escape.”

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